One of China’s three powerful antitrust regulators, National Development and Reform Commission has this week imposed its largest ever antitrust fine of RMB6.088bn (approximately US$975m) on the US company, Qualcomm. This dwarfs China’s previous largest fine on a single company of RMB290m (approximately US$46m) levied in August 2014.

The record fine follows a 14 month investigation into Qualcomm’s intellectual property licensing practices in China in which the NDRC is understood to have alleged that Qualcomm infringed China’s Anti-Monopoly Law and abused its dominant market position by charging discriminatory royalties for access to its portfolio of standard essential patents relating to 3G and 4G mobile telecommunication standards.

The antitrust settlement

In addition to the record fine, which the company has stated that it will not contest, Qualcomm has agreed to modify its licensing practices. Under the settlement with the NDRC, Qualcomm has agreed to unbundle its 3G and 4G licences from licences to its other patents and to modify its royalty rates and other terms and conditions. It is understood that these terms represent a sizeable reduction in Qualcomm’s royalty rates that were previously offered to Chinese companies. 

Xu Kunlin - Director General of the Bureau of Price Supervision and Anti-monopoly Bureau of the NDRC – has stated that the NDRC will soon release the “antitrust settlement” reached with Qualcomm. 

Background

The AML is China’s comprehensive competition law that came into effect on 1 August 2008. The AML is enforced by three agencies: (i) the NDRC, which is the antitrust agency responsible for price-related infringements such as price fixing; (ii) SAIC (the State Administration For Industry & Commerce), which is the antitrust agency responsible for non-price-related infringements; and (iii) MOFCOM (the Ministry of Commerce), which enforces the merger control regime in China.

Unlike the EU and the US antitrust regulators, there is no published detailed antitrust settlement procedure in China. However, the decision to publish this antitrust settlement with Qualcomm may indicate that the NDRC is increasingly responding, to a certain extent, to the perception of a relative lack of transparency in aspects of the NDRC process. The publication of this settlement follows on from the NDRC’s decision, in September 2014, to publish non-confidential versions of twelve decisions fining Japanese automotive components suppliers and 24 decisions in an insurance cartel. 

More generally, the level of the fine combined with the NDRC’s willingness to pursue contentious cases that are at the frontier of antitrust analysis would seem to confirm China’s place at the table of top international antitrust enforcement agencies. It also serves to warn companies of the appetite and ability of the Chinese antitrust enforcement agencies to mount increasingly sophisticated investigations.